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The next ACA compliance hurdle employers are set to face is managing subsidy notifications and appeals. Many exchanges recently began mailing out notifications this summer and it’s important for employers to make sure they’re prepared to manage the process. Why? Well, subsidies—also referred to as Advanced Premium Tax Credits, are a trigger for employer penalties. If you fail to offer coverage to an eligible employee and the employee receives a subsidy, you may be liable for a fine.
If an employee receives a subsidy, you’ll receive a notice. This is where things can get complicated. You need to ensure that the notifications go directly to the correct person or department as soon as possible, because you (the employer) only have 90 days from the date on the notification to respond. And rounding up these notices may not be so easy. For example, your employee may not have put the right employer address on their exchange / marketplace application. Most often, employees will list the address of the location where they work, not necessarily the address where the notification should go, like your headquarters or HR department. If the employee is receiving a subsidy but put a wrong address or did not put any address for their employer, you will not even receive a notice about that employee.
Once you receive the notification, you must decide whether or not you want to appeal the subsidy. If you offered minimum essential coverage (MEC) to the employee who received a subsidy and it met both the affordability and minimum value requirements, you should consider appealing.
You may think that appealing a subsidy and potentially getting in the way of your employee receiving a tax credit could create complications. Believe it or not, you may actually be doing your employee a favor. If an employee receives a subsidy when they weren’t supposed to, they’ll likely have to repay some (or all) of the subsidy amount back when they file their taxes. Your appeal can help minimize the chance of this happening since they will learn sooner rather than later that they didn’t qualify for the subsidy. Plus, the appeal can help prevent unnecessary fines impacting your organization by showing that qualifying coverage was in fact offered.
If you have grounds to appeal, you can complete an Employer Appeal Request Form and submit it to the appropriate exchange / marketplace (Note: this particular form is intended to appeal subsidies through the Federal exchange). The form will ask for information about your organization, the employee whose subsidy you’re appealing, and why you’re appealing it. Once sent, the exchange will notify both you and the employee when the appeal was received.
Next, the exchange will review the case and make a decision. In some cases, the exchange may choose to hold a hearing. Once a decision is made, you and your employee will be notified. But it doesn’t necessarily end there. Your employee will have an opportunity to appeal the exchange’s decision with the Department of Health and Human Services (HHS). If HHS decides to hold a hearing, you may be called to testify. In this situation, HHS will review the case and make a final decision. If HHS decides that the employee isn’t eligible for the subsidy, then the employee may have to repay the subsidy amount for the last few months. On the other hand, if the HHS decides the employee is eligible for the subsidy, it will be important for you to keep your appeal on file since this can potentially result in a fine from the IRS later in the year.
Sound complicated? It certainly can be. Managing subsidies and appeals could quickly add up to a substantial time investment, and if handled improperly you could see additional impacts to your bottom line in the form of fines. Handling subsidy notifications and appeals properly up front can lead to fewer fines down the road, benefiting both you and your employees.